SINGAPORE (Sept 25): RHB Group Research says the upcoming Singapore General Election could potentially open up more project wins for building maintenance and estate upgrading services provider ISOTeam.
The brokerage says it expects the GE to be held next year.
“We believe there will be initiatives coming up on the improvement and enhancement of the liveability and the environment for the residents. Hence, ISOTeam could be a key beneficiary of the GE as volume usually picks up pre- and post-election,” says lead analyst Lee Cai Ling in a Sept 25 report.
Already, ISOTeam has been reporting a number of contract wins recently.
On Sept 20, the group announced it had won 13 projects with a total contract value of $31.0 million.
These include four addition and alteration (A&A) projects worth a total of $18.2 million; two repair and redecoration (R&R) projects worth a total of $7.7 million; and four interior design contracts worth a total of $3.1 million.
The A&A projects include supply, installation, construction, completion and maintenance of architectural works to Lentor MRT Station as well as a Neighbourhood Renewal Programme to 14 blocks in Yishun.
Meanwhile, the R&R projects include works to 50 blocks at the Jurong West area.
The various contracts are expected to be completed between November 2019 and March 2021.
The group says the contract wins are expected to have a positive impact on its earnings per share and net tangible assets per share for the current financial year ending June 30, 2020.
Including another $20.3 million worth of projects announced in July, this brings ISOTeam’s total contract wins in the 1Q20 ending September to $51.3 million.
As at July 31, 2019, the group’s orderbook stood at $113.5 million.
For the FY19 ended June, ISOTeam saw its earnings surge 14-fold to $6.8 million, from $0.5 million in FY18.
FY19 revenue increased 63% to $136.6 million, from $83.8 million a year ago, due to a significant increase in revenue contributions across all business segments.
Breaking down the topline, the group’s A&A segment delivered an 86.8% jump in revenue, while the R&R, coating & painting and others segments saw revenue increase by 37.9%, 45.0% and 52.6%, respectively.
See: ISOTeam swings back into the black in 4Q19 on higher sales
The group in July also announced it is acquiring a clutch of six companies from Pure Group for $24 million to bolster its regional presence.
Pure Group provides project and construction management services as well as commercial and retail fitting-out works in Singapore, Philippines, China, Malaysia and Thailand.
See: ISOTeam makes $24 mil acquisition of Pure Group to bolster regional foothold
“We look towards more resilient earnings from ISOTeam as it is poised to ride on the government initiatives, as well as the expansion plans of the two IRs from the group’s recent acquisition of Pure – if completed,” says Lee.
“The acquisition of Pure has also turned ISOTeam into a turn-key commercial fitting-out solutions provider, improving the chances of winning more projects,” she adds.
Year-to-date, the counter has climbed 13.6% from 19.8 cents in January. As at 3.50pm, shares in ISOTeam are trading 1 cent lower, or down 4.3%, at 22.5 cents.
According to RHB valuations, ISOTeam is trading at a price-to-earnings (PE) ratio of 9.5 times and a dividend yield of 2.1% for FY20F.
